Property Management

Routine Inspection Tips in Commercial Property Management

In commercial property management, the practice of undertaking routine inspections is a very important part of the property control process.  In that way you can understand how the property is performing for the tenants, the landlord, and any visitors to the premises.

So let’s say that you have a number of properties, each of them containing a number of tenants.  All of a sudden you have plenty of ‘inspections’ to do in a controlled way.  An organised inspection process is required across the portfolio.

Failure to regularly inspect a managed property and the contained tenancies can expose you as the property manager to ‘negligence’ of duty.  That can also lead to a property failure that could injure a person in the property.

Many property managers and brokerages have ‘release clauses’ in their appointments to act in an effort to avoid professional ‘oversight’ and ‘negligence’ of duty.  The fact of the matter is that you cannot contract out of or away from the law as it applies to the services to be provided in and by your appointment to act.  For that reason any ‘disclaimer’ and ‘let-out’ clauses in a property manager’s appointment are generally of little benefit.  If a client wants to sue you as the property manager or broker for something you forgot to do or did not do well, expect the legal action to occur.  The performance obligations on property managers cannot be avoided or ‘contracted away from’.

You have also likely heard of the words ‘fiduciary duties’ in property agency.  The words relate to the obligations of the agent or broker to their client.  When you take up an agency of any type on a property, the ‘fiduciary relationship’ exists between you and the client; you have a duty to perform services in a particular way.

So the message is clear.  The property inspection process is important as part of your professional services in management and it should be merged into the property management plan.

Here are some ideas to help you handle this routine inspection factor of your commercial real estate management services.

  1. Check out all of the leases in the property to see if there are any critical issues that will impact the inspection process.  Some leases will have a ‘notice period’ that should be observed with the tenant before an inspection can occur.
  2. Understand the permitted use of any lease and that the tenant(s) are adhering to that use.  The permitted use should comply with the capabilities of the property and the zoning regulations for the precinct.
  3. As part of the tenancy inspection, involve your building contractors where possible so you can understand the performances of the ‘essential services’ in the areas to be inspected.  Look for any potential of breakdown or under performance.
  4. Look for matters of ‘non-compliance’ in the building and in the tenancy.  Understand the building codes that apply to the property and ensure that the tenant and the operations of the property comply.
  5. Look through the tenants lease to see if any obligations apply that can be checked or discussed whilst you inspect.  They will usually include insurance, air conditioning, fire prevention services, fit out, security, electricity, and cleaning.
  6. Use a checklist to monitor and record your actions and findings as you inspect the premises.  Go through the property comprehensively and record what you see and the things that are of concern.
  7. In some situations the inspection may throw up issues to be investigated further.  You may need building, structural, engineering, and machinery experts to advise you.
  8. Take photographs of the tenancy and property as part of the inspection process.  Attach those to your written report.  Take notes during the inspection.  Notes are valuable when disputes occur later.
  9. If it is decided that the tenant is to do something as a result of the premises inspection, send written confirmation of that fact to them as soon as possible after the inspection.  Make sure that they follow through on the required action or instruction.
  10. Many properties have issues to watch including environmental and hazardous goods or fibres.   Any orders or notices on the property must be adhered to.
  11. Report to the landlord after you have undertaken the routine inspection.

So this list will help you get started with the property inspection process.  Routine inspections of tenancies require controlled processes and diligence.

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